December 29, 2016

6/23/2015

What to do with your Income Tax Refund. 

First of all, change your withholding so the government doesn't take as much out of each paycheck. A tax refund is just the government borrowing money from you interest free. They will use your money, interest free, until it is time to repay you, interest free. 

Be disciplined and save the "extra money" you have in your paychecks after you change your withholding. That way when the taxes are done and you owe you have it. 

If you can't be disciplined, though it is probably best to keep the withholding the same. Better to lend to Uncle Sam than for him to come and get it, one way or the other, from you if you don't have it. 

When you get the refund, if any, I recommend you plunk it into a savings account. I think, depending on how much you get back you should splurge a LITTLE. Then use the rest to pay down debt or put it into a less liquid savings to go towards a large purchase like a house or a car.